Valuation of REITs Worldwide with

an Emphasis on the Valuation of

New Zealand and Australian
Property Trusts

Randy Kirk
1/30/2011
Executive Summary:

• The purpose of this report is to compare net asset value and calculated
property values of Real Estate Investment Trust securitieswith share
market valuations as of January, 2011, with an emphasis on property
trusts in New Zealand and Australia.

• Approximately 168 REITs are included in this report, 46 in the United

States, 53 in Australia, 7 in New Zealand, 16 in Singapore and Hong Kong,
11 in the UK, and 16 in Canada, which represent the bulk of investable
REITs worldwide (excluding mortgage REITs, excluding Japanese REITs and
excluding REITs under $100M market capitalization) at January 2011).

• New Zealand and Australian REITs appear relatively undervalued on a

national basis. 38 out of 56 or 71% of NZ and A-REITs are selling below
stated NAV at January 2011. The reason for this undervalued status
include disillusionment on the part of NZ and Australian investors due to
 share price declines in 2008 and early 2009, driven by write downs of
property values during the Global Financial Crisis.

• 12 A-REITs and 2 NZ REITs -- Kiwi Property Trust (NAP.NZ) and Argosy

Property Trust (AMO.NZ) -- are recommended for further research for as
potential buys. Westfield Property Trust(WDC.AX) and Thakral (THG.AX)
appear the most promising A-REITs for investment, based on discounts to
NAV and calculated property values,as well as leverage levels and yield
levels.

• On national level, NZ and A-REITs have relatively promising investment

characteristics in comparison with US, Canadian and UK REITs, due to high
spreads between the 10 year NZ and Australian governmental bonds and
REIT yields, relatively high implied capitalization rates in NZ and Australia,
a lack of recovery in A-REIT and NZ-REIT share prices(despite similar
declines during the GFC) from late 2008, and a lack of institutional l
ownership of REITs in NZ and Australia (which could change in the future).

• Low levels of indebtedness are important for REITs in 2011. REITs with
over 45% debt to total assets will likely have to sell assets and/or raise
equity in the next year to pay down debt according to the rating agency
Moody’s, which will reduce returns for shareholders.

• Notably, Singaporean REITs appear very strong, with yields between 6%

and over 10% in comparison to the Singaporean 10 year governmental
bond yield of 2.62%. Singapore was the 2nd fastest growing economy in
2010 after Qatar, which supports real estate values, and S-REITs are
relatively underleveraged. (debt to total assets averages around 20% for
the S-REIT sector). 6 S-REITs are recommended for further research,
including Fraser’s Commercial Trust (A48U.SI) and AIMS AMP Capital REIT
(BU5U.SI).
Table of Contents
Introduction:..........................................................................................................4
5 Year Historical Performance of the National REIT Sectors:.................................5
Figure 1: 5 Year Historical Performance of the National REIT Sectors:...............5
REIT Industry Overview:.........................................................................................6
Figure 2: Property Investment by Type for US REITs..........................................6
Figure 3: US REIT Dividend Yield Compared to US Share Yield .............Figure 4:
Relative 30 Year Performance of REITs vs. Other Asset Classes.........................7
Figure 5: 10 Year Treasury Note Yield 1962-2008..............................................8
NZ and A-REIT Recommendation Overview:..........................................................9
New Zealand and Australian REITs Listed by Ascending Market Capitalization to
Net Asset Value:....................................................................................................9
Figure 6: NZ and A-REITs listed by Ascending Market Cap divided by NAV......11
Estimates of Current Capitalization Rates Utilized by the Recommended A-REITs
and NZ-REITs to Calculate NAV:...........................................................................12
Figure 7: Implied and Utilized Capitalization Rates for NZ and A-REITs............12
Valuation Analysis of NZ and A-REITs Based on a Range of Capitalization Rates:
............................................................................................................................14
How much appreciation will a 100 bps reduction in capitalization rates provide to
NZ and A-REITs?..................................................................................................16
Analysis of NZ and A-REITs Discount to NAV:......................................................16
Summary of Recommendations: C and US REITs:................................................20
Canadian, UK and US REITs Listed by Ascending Enterprise Value to Property
Value:..................................................................................................................20
Figure 16: C, UK and US-REITs listed by Ascending Enterprise Value divided by
Property Value..................................................................................................21
Summary of Recommendations: S-REITs:............................................................22
Singaporean REITs Listed by Ascending Enterprise Value to Property Value:......22
Figure 17: Singapore and Hong Kong REITs listed by Ascending Enterprise
Value divided by Property Value.......................................................................22
Valuation Analysis of S-REITs Based on a Range of Capitalization Rates:............23
Risks to REIT Valuations:.....................................................................................24
Conclusion:..........................................................................................................24
Appendix:............................................................................................................26
Factors Driving REIT Valuation:...........................................................................26
Green Street Advisor’s Valuation Overview:.....................................................26
Macro Factors:..................................................................................................26
REIT Specific Factors:.......................................................................................27
Observed Average Premium to Asset Value:....................................................28
REIT Data, New Zealand and Australia:...............................................................29
Canadian REITs:...................................................................................................33
REIT

Introduction:

This report analysesReal Estate Investment Trust securitiesworldwide by

comparing estimated property values with share market valuations, with a
particular emphasis on property trusts in New Zealand and Australia.The most
interesting securities for further research for potential investment are expected
to be trading at the deepest discounts to estimated property value, all other
factors equal.

The question that serves as a background to this report is: how areproperty
values and “intrinsic value” for REITs calculated?According to Green Street
Advisors, one of the world’s leading REIT research houses:

REIT valuation can be best assessed by analysing separately the two key
components of value: 1. The net value of the in-place assets. 2. The present
value of future investment opportunities.1
Green Street Advisors further elaborates, concerning factor 1 above:
Operating Real Estate (is) usually the most important part of an NAV analysis.
A 12-month look-forward estimate of NOI is calculated, the magnitude of an
appropriate cap-ex reserve is determined, and an appropriate cap rate is
applied to economic NOI (NOI less cap-ex).2

1 Green Street Advisors “NAV Based Valuation Model.”

https://www.greenstreetadvisors.com/about/page/research/#!/v/n Accessed 23/1/11

2 Green Street Advisors “Methodology: Section 2: NAV

https://www.greenstreetadvisors.com/about/page/research_navmodel_2_1/ Accessed
23/1/11
This report will focus mainly part 1 of Green Street Advisor’s statement regarding
REIT valuation described above – that is, on existing properties, and not on
future potential income from new investments. Net Operating Income excluding
maintenance capital expenditures is calculated for REITs based on rolling 12
month historical results. The calculated NOI is divided by a range of
capitalization rates, with a particular capitalization rate used primarily by
geographical location (7.00% for Australia and New Zealand, 6.00% for the US,
Canada, the UK, Singapore and Hong Kong).In addition to valuation based on NOI
and capitalization rates, REITs are also valued by reported net asset value (NAV)
as required under IAS GAAP.

It should be noted that, ideally, REIT valuation would also include part 2 of Green
Streets’ methodology – an analysis of future investment income. The results in
this report are therefore expected to be more conservative than if future
opportunities are analysed (that is, assuming the REIT does not subtract value in
its investment in future properties).
168 REITs are included in this report, 46 in the United States, 53 in Australia, 7 in
New Zealand, 16 in Singapore and Hong Kong, 11 in the UK, and 16 in Canada.
The United States is the world’s largest REIT market in terms of overall market
capitalization and in terms of number of firms -- approximately 150 REITs are
listed in the US -- although several other countries have substantial REIT sectors,
including Australia, Canada, Great Britain, New Zealand, Japan and Singapore.
Several other countries have passed legislation authorizing the adoption of the
REIT legal structure for property firms, including Mexico, Germany, Russia, Czech
Republic and Mexico, although to date (January 2011) do not have substantial
numbers of REITs trading on their respective stock exchanges.

5 Year Historical Performance of the National REIT

Sectors:

A chart of 5 year performance of the major national REIT sections is presented

below. It should be noted that New Zealand, Singapore, and the UK REIT
industries do not have associated REIT equity indexes, so these sectors are
represented by the largest REIT in each country (Kiwi Income Property Trust as
representative for New Zealand (KIP.NZ), Capital Mall Trust as representative for
Singapore (C38U.SI), and Land Securities for Great Britain (LAND.L).
Figure 1: 5 Year Historical Performance of the National REIT
Sectors:

Not
es to Notes for Figure 1: ^AXPJ is S&P/ASX 200 REIT index (Australia), XRE.TOis the
iShares S&P/TSX Capped REIT Index (Canada), ^DJR is the US Dow Jones REIT index,
LAND.L is Land Securities (Great Britain), KIP.NZ is Kiwi Income Property Trust (New
Zealand) and C38U.SI is Capital Mall Trust (Singapore).Note that Land Securities (UK) has
not recovered from its lows from the 2008 financial crisis, but is still selling above NAV at
January 2011 due to a relatively high valuation pre-crisis and lower NOI post-crisis.

REIT Industry Overview:

A brief overview of the international REIT industry is presented in this section, in

order to provide background to the findings in the report. The United States was
the first country in the world to pass legislation authorizing a Real Estate
Investment Trust legal structure, when President Eisenhower passed the Real
Estate Investment Trust Act in 1960. Canada adopted REIT legislation in the late
1970’s and Australia and New Zealand passed REITs in the form of property
trusts in the late 1970’s. The UK is a relative latecomer into the REIT universe,
as Great Britain authorized REITs in 2007, and now lists about 20 REITs on the
LSE. Currently approximately 300 REITs are in existence worldwide across all
sectors – from office to industrial to mortgage to diversified (mortgage and
property) according to a search on Bloomberg at January 2011, and about half of
worldwide REITs are located in the United States.
Figure 2: Property Investment by Type for US REITs

Source NAREIT

Note that many of these REITs are well under $100M in market capitalization and
therefore are likely to not be of interest to most investors, in so far as larger
REITs have advantages in accessing capital and gain from have a more
diversified portfolio, which supports a consistent dividend yield.

According to Brad Case, VP of Industry Information at US National Association of

Real Estate Investment Trusts (NAREIT), REITs have advantages in terms of
accessing capital through the public stock and bond markets, compared to
privately held real estate investment funds. This access to public markets
supports reasonable costs of capital, and allows REITs to invest in larger real
estate projects.3 REITs are also at pressure to put funds to work in real estate
assets, which ensures that investors have access to yield. REITs offer higher
dividend yields than most stocks, which appeal to many classes of investors,
including institutional investors and other investors reliant on income. A
comparison of average REIT yields in the US compared to average stock yields is
presented in Figure 3.REITs have yielded anywhere from 6% to 2% higher, on
average than shares (note that the yield differential has narrowed over time in
the US – perhaps due to increasing acceptance by institutional investors of US
REITs and lower numbers of investments that offer attractive yields).

REITs have outperformed most asset classes on a 30 year basis to 2009 – even
with the financial crisis in late 2008 which reduced REIT share prices. As shown
in Figure 2, over a 30 year period ending December 31, 2009, REITs have
averaged an annual average total return of 11.77%, compared to 11.23% for the
US S&P 500 and 8.78% for the Barclay Capital’s Aggregate Bond Index.

3 Brad Case, NAREIThttp://www.youtube.com/watch?v=8G5won3mlSg Accessed 21/1/11

 Figure 3: US REIT
Dividend Yield
Compared to US
Share Yield Figure
4: Relative 30
YearPerformance of
REITs vs. Other
Asset Classes

Source: NAREIT

The reasons for the higher return of REITs versus other asset classes is likely in
part due to declining average interest rates in the US. As shown in Figure 5, the
yield on the 10 year US treasury has steadily declined since 1980 (with a few
minor reversals), from a high of 16% in 1980 to approximately 3.5% in 2011.
The decline in interest rates has been driven by several factors: declines in
inflation in the US from very high levels in the late 1970’s, continued federal
funds easing by the US Federal Reserve, particularly in 2000 and 2008 in order
to stimulate the economy, among other factors.

The decline in overall interest rates has resulted in a reduction capitalization

rates for property in the US since 1980, raising property prices. The lower yield
has driven investors to value alternative sources of yield more highly, such as
REITs. As noted by the “bond king” Bill Gross of the world’s largest bond fund
PIMCO, the 30 year decline in interest rates may be over in the United States
from 2010 onward, due to extremely low levels of interest rates (which have
almost nowhere to go but up) and higher governmental debt levels which
requirehigher interest rates to attract investors.4

Figure 5: 10 Year US Treasury Note Yield 1962-2008

Source: Data Compiled from Bloomberg on US 10 year Treasury

yields

The upshot is that REITs will likely not see the extent of declines in interest rates
going forward in the United States from 2011 onward, and therefore investors
should not expect to see dramatically increased returns stemming from lower
capitalization rates. However, this does not mean that other countries, such as
Australia and New Zealand -- which have currently the highest governmental
interest rates in the developed world –will not see declining interest rates over
the next several years which would support A-REIT and NZREIT share prices.

4 Bill Grosshttp://www.businessweek.com/news/2010-03-25/pimco-s-gross-says-bonds-
may-have-seen-their-best-days.html Accessed 1/23/11
NZ and A-REIT Recommendation Overview:

• NZ and A-REITs are recommended for further research based on 4 main

criteria:
○ Share market undervaluation compared to NAV
○ Share market undervaluation compared to calculated property
value
○ Leverage ratios
○ Dividend yield
• Calculated property value is based on calculated Net Operating Income
(historical rolling 12 months) divided by a constant capitalization rate of
7.00%.(Note that an analysis of property values of the recommended NZ
and A-REITs based on a range of property values is presented in the a
following section)
• 12 A-REITs are recommended for further research in Figure 5, and 2 NZ-
REITs are recommended.
• Westfield Property Trust and Thrakal are the most interesting of the other
recommended A-REITs, in terms of the combination of share market
undervaluation compared to NAV and calculated property value, leverage
ratio and dividend yield. Both A-REITs appear to have higher quality
properties.
• 2 of the deepest discounted recommended A-REITs, Challenger Wine Trust
and GEO Property Group, are very small and therefore may not warrant an
overall high capitalization rate. Further, GEP Property Group is a special
situation in which the REIT is liquidating in 2011. Appreciation potential is
therefore limited.
• Kiwi Property Trust and AMP NZ Office Property Trust are recommended
for further research from New Zealand. Kiwi Property Trust and AMP NZ
Office Property Trust has the strongest, highest quality portfolio of the NZ-
REITs with moderate leverage levels and acceptable dividend yields.

New Zealand and Australian REITs Listed by Ascending

Market Capitalization to Net Asset Value:

Figure 6 lists the New Zealand (NZ-REITs) and Australian (A-REITs) property
trusts by ascending discount to market capitalization. According to the value
investor Benjamin Graham, the deeper the discount to NAV, the more potential
for upside share price appreciation for share investors. However, many of the A-
REITs have declined to such a deep discount due to high indebtedness, likely
requiring them to sell significant amounts of assets and/or issue significant
equity to survive in 2011 and beyond.

Importance of Indebtedness Levels -- Indebtedness levels are assessed to be

critical in the assessment of the A-REIT and NZ-REITs. Note that under 45% net
debt to total assets is ideal, according to Moody’s Research Services for 2011.5
As mentioned, firms with higher net indebtedness will likely have to reduce
leverage in 2011 and beyond (by selling assets or shares). A major reason for
the A-REIT and NZ-REIT share declines in late 2008 and 2009 – declines in share
prices averaged approximately 45% peak to trough – was lower revaluations of
property prices, which was then run through the income statement, resulting in
large losses, which flowed through to equity, resulting in violations of debt to
assets banking covenants. A-REITs and NZ-REITs were then forced to sell assets
and shares in order to maintain compliance with their banking covenants. A
financial crisis of the magnitude of the Global Financial Crisis of late 2008 is not
expected in the intermediate future, but investors should be wary of the
potential of high debt levels to reduce returns for NZ and A-REIT investors.

It should be noted that several NZ and A-REITs have cancelled dividends in 2009
and 2010 to pay down debt, reducing their attractiveness to income-focused
investors.

5 Merrie Frankel, VP, REIT Research, Moody’s Investor’s Research Services:

http://www.youtube.com/watch?v=-_3BLX2KkWg Accessed 1/24/11
Figure 6: NZ and A-REITs listed by Ascending Market Cap divided
by NAV
(First Listed Indicate Deeper Discount)(Colours indicate property sector: Office
RetailIndustrialResidential DiversifiedOther)
(Dollar Values in $A or $NZ, depending on the main listing ASX or NZSX)

Property Ticke Pri Current Gro Mark EV/Pr Debt/ Reco

Trust r ce Market ss et op Total mmen
Capitaliza Yiel Cap/N Value Asset dation
tion d AV @7% s

Challenger CWT. 0.23 41,001,410 5.0% 0.52 0.26 Furthe

Wine Trust AX 27% r
Resear
ch

GEO GPM. 0.19 81,103,900 13.2 0.54 0.29 28% Furthe

Property AX % r
Group Resear
ch

Thakral THG.A 0.53 312,785,07 0.0% 0.54 0.87 48.80 Furthe

X 5 5 % r
Resear
ch

Aspen Group APZ.A 0.48 133,912,32 18.7 0.68 0.78 30% Furthe
X 0 % r
Resear
ch

Carindale CDP.A 4.12 288,540,00 6.7% 0.74 1.03 11.7% Furthe

Property X 2 0 r
Resear
ch

Mirvac MGR. 1.23 4,223,700, 6.5% 0.74 1.07 26.80 Furthe

Property AX 5 000 % r
Trust Resear
ch

ING Office IOF.A 0.55 1,500,950, 7.1% 0.74 1.15 15.40 Furthe
Fund X 000 % r
Resear
ch

Kiwi KIP.N 1.01 972,581,99 8.7% 0.83 0.89 50% Furthe

Property Z 8 r
Trust Resear
ch

DEXUS DXS.A 0.80 3,843,472, 6.3% 0.85 0.92 30% Furthe

Property X 5 500 r
 Group Resear
ch

Australand ALZ.A 2.93 1,690,141, 3.4% 0.85 1.39 27.10 Furthe

X 200 % r
Resear
ch

AMP NZ AMO. 0.79 768,243,22 8.9% 0.86 0.79 23% Furthe

Office NZ 0 r
Property Resear
Trust ch

National NAP.N 0.51 84,481,426 8.8% 0.87 0.57 22% Furthe

Property Z r
Trust Resear
ch

CFS Retail CFX.A 1.78 4,843,085, 7.0% 0.88 1.19 29.50 Furthe
Property X 5 205 % r
Trust Resear
ch

ALE Property LEP.A 1.92 294,456,65 12.5 0.90 0.82 52% Furthe
Group X 5 % r
Resear
ch

Westfield WDC. 9.62 11,063,000 6.7% 0.92 0.88 42.70 Furthe

Property AX ,000 % r
Trust Resear
ch

Bunnings BWP. 1.77 744,719,39 6.8% 0.94 0.84 18.80 Furthe

Warehouse AX 0 % r
Resear
ch

Notes:
Only undervalued NZ and A-REITs on an NAV basis are presented in Figure 6.
Property value is compared with enterprise value (market capitalization plus debt, minus cash and
equivalents). Property value is calculated by 12 month historical NOI divided by a capitalization
rate of 7.00%. NOI is defined as property revenue minus direct operating expenses minus
maintenance capital expenditures (interest expense on debt and federal taxes are not included in
NOI).

Estimates of Current Capitalization Rates Utilized by the

Recommended A-REITs and NZ-REITs to Calculate NAV:

Figure 16 presents the capitalization rate utilized by the recommended NZ and

A-REITs for the respective companies’ calculation of NAV. This is to say, the
capitalization rates are this report’s estimate of company internally used
capitalization rates. In addition, the implied capitalization rate at the market
price of the shares is presented. This table serves as a complement to the
preceding section, to see the existing capitalization rates utilized in Australia and
New Zealand. Note that the calculated capitalization rates are dependent on the
author’s calculation of NOI, which is historical and may not estimate sustainable
NOI accurately, so some error may be present in the capitalization rates in Figure
16.

Figure 7: Implied and Utilized Capitalization Rates for NZ and A-

REITs

Property Trust Ticker Price Implied Cap Rate Approx Cap Rate
(1/11) at Current Price used for NAV

Challenger Wine Trust CWT.AX 0.23 26.43% 19.48%

GEO Property Group GPM.AX 0.19 24.50% 17.33%

Thakral THG.AX 0.535 8.02% 6.23%

Aspen Group APZ.AX 0.48 8.92% 7.54%

Centro Retail Trust CER.AX 0.24 6.64% 5.89%

Carindale Property CDP.AX 4.122 6.78% 5.23%

Mirvac Property Trust MGR.AX 1.235 6.57% 5.22%

ING Office Fund IOF.AX 0.55 6.08% 5.03%

Kiwi Property Trust KIP.NZ 1.01 7.85% 5.00%

DEXUS Property Group DXS.AX 0.805 7.62% 6.84%

Australand ALZ.AX 2.93 5.04% 4.59%

AMP NZ Office Property AMO.N 0.79 8.85% 7.73%

Trust Z

National Property Trust NAP.NZ 0.51 12.19% 6.69%

CFS Retail Property CFX.AX 1.785 5.88% 5.40%

Trust

ALE Property Group LEP.AX 1.92 8.52% 8.12%

Westfield Property WDC.A 9.62 7.98% 7.51%

Trust X

ING Industrial Fund IIF.AX 0.53 7.04% 6.77%

Bunnings Warehouse BWP.A 1.77 8.36% 7.97%

X
 Average: 9.63% Average: 7.70%

Average ex CWT & Average ex CWT &

GPM: 7.65% GPM: 6.36%

As shown in Figure 7, the calculated internal capitalization rates are on the low
side for a relatively high interest rate country such as Australia and New Zealand
on average. One can tentatively say that utilized interest rates in Australia and
New Zealand will likely remain constant going forward in the intermediate term,
with a few exceptions. Gains in terms of share market appreciation will come
from investors awarding A-REITs and NZ-REITs a higher valuation, and not from
lower capitalization rates awarded by the REITs themselves to their own
properties, on average.
Valuation Analysis of NZ and A-REITs Based on a Range
of Capitalization Rates:

This section will present an analysis of the recommended NZ and A-REITs based
on a rangeof capitalization rates. The results are intended to shed light on the
potential share appreciation and depreciation of the recommended NZ and A-
REITs under different capitalization rates, and therefore different scenarios
interest rate and competitive conditions for the purchase of commercial real
estate.

A consistent net operating income is assumed, calculated from historical 12-

month NOI, and capitalization rates, from a low of 5% up to a high of 13% are
utilized to calculate potential property values, which is then compared with the
current enterprise value of the NZ and A-REITs. In reality, NOI would likely
change under different economic and competitive conditions. The higher the
grade of property, the more resistance, as a general rule, the property income is
to difficult economic conditions. Using a consistent NOI is therefore a limitation
in the analysis presented in this section.

Note that a 5% capitalization rate results a relatively high valuation (although

5% capitalization rates are not unknown in the US and Japan, for the highest
grade property, as interest rates in these countries are very low and investor
demand for the highest grade properties is high). On the other hand, a 13%
capitalization rate is a extremely pessimistic valuation metric, which could
potentially arise if there is runaway inflation in NZ and Australia which results in
very high interest rates. It should be noted that this scenario is unlikely, but the
13% capitalization rate is utilized to show potential losses in the most extreme
case.

Valuations across capitalization rates for recommended A-REITs is presented in

Figure 7.

Source: Compiled data from Annual Reports and Bloomberg

As shown in figure 8, two A-REITs, Challenger Wine Trust and GEO Property
Group, are significantly more undervalued on an NOI basis than the rest of the
recommended A-REITs. This is partially due unusual situations – GEO Property
Group is liquidating in 2011, meaning that investors likely have abandoned this
REIT (although there is potentially a short term gain in buying GEO, but
capitalization rates will not have the chance to move significantly in less than
one year so gains may be limited). Challenger Wine Trust looks interesting,
although is relatively small at approximately $A40M in market capitalization,
which potentially has resulted in the Trust being dropped from many funds due
to its small size. Note also that wine properties are unlikely to command a high
capitalization rate – Challenger Wine Trust itself utilizes a 19.5% capitalization
rate to value its properties (implied and company utilized capitalization rates are
explored in the next section).

Figure 9 provides more detail on the other recommended A-REITs. Note that
Thakal and Westfield Property Trust appear to be the same line in the chart
above, due to very similar appreciation percentages based on cap rate. Aspen
Group appears to be the most undervalued, however Aspen runs holiday parks in
Australia which may not warrant a high capitalization rate. Bunnings Warehouse,
which operates warehouses in Australia, appears attractive based on the fact
that it holds industrial property – however note that several competitors are in
line to and is therefore likely to demand a relatively high capitalization rate, and
is currently undervalued on a NOI and NAV basis. Westfield, the largest retail
REIT in Australia and Thakal, a major operator of hotels, also appear attractive
based on their relative undervaluation and relatively attractive underlying
properties.

Valuations at different capitalization rates for recommended NZ-REITs is

presented in Figures 9:

Source: Compiled data from Annual Reports and Bloomberg

National Property Trust appears the most undervalued in this analysis, followed
by Argosy Property Trust. Kiwi Property Trust is the largest NZ-REIT by market
capitalization, and holds many of New Zealand’s most prestigious office
buildings, and therefore would likely command a higher capitalization rate than
National Property Trust and Argosy Property Trust. The extent of the discount is
an area for future analysis.

How much appreciation will a 100 bps reduction in

capitalization rates provide to NZ and A-REITs?
 • From the analysis presented above, an estimated 10-20% share price
appreciation is expected from a reduction of 100 bps of market implied
capitalization rates for NZ and A-REITs.

• This result is perhaps a slightly lower appreciation than may have been
expected from the recent home price appreciation in the 2000’s, when it
was not unusual for certain countries and metropolitan areas to see
annual real estate appreciation in excess of 20% per annum. However
note, that the price appreciation is not inclusive of gains in NOI, in that NZ
and A-REITs on average had mid-single digit NOI appreciation before the
Global Financial Crisis.

• A reduction of capitalization rates could be driven by more intense

competition for commercial real estate, and/or by lower overall interest
rates in in Australia and New Zealand. Note that the possibility of lower
interest rates in Australia and New Zealand is not analysed in this report.

• Note that lower capitalization rates in Australia and New Zealand could be
driven by additional sources of financing for commercial real estate -- the
introduction on a large scale of commercial mortgage backed securities,
private equity commercial real estate funding, preferred REIT financing, as
examples. Note that the possibility of additional funding is more likely in
Australia than New Zealand, due to the relative size of the financial
markets in Australia versus NZ, but is not fully analysed in this report.

Analysis of NZ and A-REITs Discount to NAV:

There are High Overall Numbers of NZ and A-REITs Selling Below NAV: Overall,
many of the smaller A-REITs in particular show deep discounts to NAV, which is
unprecedented in the REIT universe (note that other countries will be analysed in
future sections). The range of discounts to NAV at January 2011 is presented in
Figure 10:

Source: Author’s compiled data

The total number of NZ and A-REITs analysed was 53, so well more than half
(approximately 38 or 71%) were selling below NAV at January 2011. This
number represents the highest percentage of any country or region surveyed.
The reason for this relative low valuation may include disillusionment on the part
of NZ and Australian investors towards their property trust sector, due to poor
performance during the Great Financial Crisis. The number one result on Google
at January 2011 for a search for the term “Australian Property Trusts” yielded an
article on an Australian blog title: “Australian Listed Property Trusts (A-REITs): As
Safe as Houses?”6which was a cynically written article concerning the dismal
performance of the major Australian property trusts in 2008 and 2009. This
distaste for A-REITs and NZREITs continued through 2010, as the sector did not
appreciate significantly in 2010 (unlike other REIT sectors by country, which had
strong performance in 2010, despite equally weak performance during the GFR
and only moderately improving fundamentals in 2010).

With improving fundamentals and the non-materialization of a new financial

crisis going forward, it is likely that the investing public of Australia and New
Zealand will re-embrace their REIT sectors, as has already occurred in other
countries. One could say that bad memories of share declines are remedied by
share price appreciation and strong yields.

More indebted NZ and A-REITs show a higher discount to NAV:This result is

shown in Figure 11. This has been discussed above – note that the most
indebted REITs are in danger of significant equity dilution going forward.

Source: Author’s compiled data

Chart 8 shows a fairly distinct trend towards higher indebtedness leading to a

higher discount to NAV.

Yields of Discounted NZ and A-REITs Overall are High Compared to the

Government 10-Year Yield: The current trailing 12 month yields of the same
discounted NZ and A-REITs are shown in Figure 9. The yields range from zero for
securities that have cancelled their dividend to high teens, with an average for
securities that pay a dividend of 8.31%. This compares with the NZ government
10 year bond of 5.58% -- a spread of 2.77% over the NZ 10 year, and the
Australian government 10 year bond of 5.75% -- a spread of 2.60%. This is
significantly higher than most REIT countries, such as the United States and the
UK, (but note, not Singapore) as the US and the UK have average REIT yields
around the same yield as the government 10 year.

Source: Author’s compiled data

Many of the Discounted NZ and A-REITs are relatively small: This result is shown
in Figure 13. The market capitalization of the discounted NZ and A-REITs
average approximately $992M, however, 19 out of 38 REITs are trading at below
$100M in market capitalization.

6 Tim Hewson, Australian Listed Property Trusts (A-REITs): As Safe as Houses?

http://www.bhatt.id.au/blog/australian-listed-property-trusts-safe-as-houses/ accessed
22/1/11
 Source: Author’s compiled data

Many of the Discounted NZ and A-REITs issued high levels of shares in 2009 to
pay down debt: The average increase in shares outstanding from 2006 to 2010
was 72%, which is a major dilution for existing shareholders. As noted, the risk
of further dilution is high if the REIT holds a relatively high level of debt, and/or if
there is a new financial crisis in the intermediate term. Dilution is a major driver
of poor share returns in late 2008 and 2009. This is represented in Figure 14:

Source: Author’s compiled data

Most NZ and A-REITs have had negative average annual dividend growth
through 2010: As a final observation, most of the NZ and A-REITs selling at a
discount have reduced dividends per share since 2006, mainly through reduced
dividends in 2009 and 2010. This is consistent with the financial crisis and the
issuance of equity.

Source: Author’s compiled data

Summary of Recommendations: C, UK and US REITs:

• Overall, REITs from the US and Canada do not appear as attractive as

REITs as from NZ and Australia, in so far that yields appear lower as share
prices have appreciated strongly in Canada and the US in 2010. UK REITs
do not look attractive at all on average, with low yields and prices that are
not undervalued on a property value basis.
• 6 REITs from the US are recommended, and 2 REITs from Canada are
recommended for further research.
• The UK REIT sector at January 2011 looked unattractive from a valuation
standpoint, in so far that no UK REITs above a £100M market capitalization
were selling below enterprise value. Further yields for UK REITs were
relatively low, at below a 5% yield, on average.
• It should be noted that REITs in Canada are yielding from 1-3% higher
effective rates than in the US, even as the Canadian and US 10 year
government bond yields are very similar (at 3.33% and 3.40%,
respectively). However, due to the relatively lower number of C-REITs
 (only about 20 listed in Canada) there are not as many C-REITs that are
selling below their owned property value.
• In the US, Sunstone Hotel Properties, Liberty Property Trust, Sovran Self
Storage and Piedmont Office Properties Trust appear relatively strong
buys – with relatively low leverage and higher than average dividend
yields. More research is needed on these REITs’ assets, however.
• In Canada, Extendicare and Dundee appear relatively strong candidates
for further research, based on level of yield, relative undervaluation and
leverage levels.

Canadian, UK and US REITs Listed by Ascending

Enterprise Value to Property Value:

This section presents C, UK and US-REITs by ascending enterprise value (market

capitalization plus debt minus cash and equivalents). US REITs are not required
by US GAAP to present net asset value – US REITs actually depreciation property
over a period from 30 to 60 years, instead of marking property to fair value as in
IAS GAAP - therefore this section will take historical NOI at a capitalization rate of
6% and compare this with enterprise value. The most undervalued securities will
be those trading at the steepest discount to calculated property value. Figure 16
presents the table of , UK C and US REITs ranked in this manner (note that at
January 2011 no UK REITs were trading below property value so no UK REITs are
included in the table below):

Figure 16: C, UK and US-REITs listed by Ascending Enterprise

Value divided by Property Value
(First Listed Indicate Deeper Discount)(Notes: Colours indicate property sector:
Office RetailIndustrialResidential DiversifiedOther)
(Dollar Values in $US or $C, depending on the main listing US exchanges or TSX)

Property Ticke Price Market Gros Enterprise Dent/ Reco

Trust r (1/11 Capitalizatio s Value/Pro Total mmen
) n (1/11) Yiel p Value @ Assets dation
d 6%

Extendicare EXE- 9.94 823,82 7.67 0.42 Furthe

UN.T 7,200 % r
O Resear
56.0% ch

Sunstone Hotel SHO 9.28 914,17 0.00 0.55 43.0% Furthe

Investors 2,800 % r
Resear
 ch

Hosipitality HPT 23.22 2,866,27 7.75 0.55 Furthe

Properties Trust 6,800 % r
Resear
36.7% ch

Liberty Property LRY 32.23 3,678,73 5.90 0.79 Furthe

Trust 2,200 % r
Resear
45.1% ch

DCT Industrial DCT 5.25 1,138,35 5.33 0.79 Furthe

Trust 7,500 % r
Resear
43.9% ch

Piedmont Office PDM 20.01 3,454,92 6.30 0.84 Furthe

Reality Trust 6,600 % r
Resear
34.5% ch

Sovran Self SSS 36.83 1,018,34 4.89 0.86 Furthe

Storage 9,500 % r
Resear
41.6% ch

Dundee D- 30.94 1,406,84 7.11 0.91 Furthe

UN.T 1,800 % r
O Resear
49.1% ch

C, UK and US-REITs are valued primarily by calculated property values, as this NAV is not required
to be presented by US GAAP. (the number of REITs from the US at approx. 150 is far higher than
the combined total of C and UK REITs at approximately 40).
Property value is compared with enterprise value (market capitalization plus debt, minus cash and
equivalents). Property value is calculated by 12 month historical NOI divided by a capitalization
rate of 6%. NOI is defined as property revenue minus direct operating expenses minus
maintenance capital expenditures (interest expense on debt and federal taxes are not included in
NOI).

Summary of Recommendations: S-REITs:

• Overall, Singapore may be the most attractive REIT sector, in so far that
the yield spread between the 10 year Singaporean governmental bond (at
2.62% at January 2011) is significantly lower than many REITs with yields
ranging in the 6% to over 10% range for S-REITs. This is the highest of in
the countries surveyed.
• 6 S-REITs are recommended for further research for a potential buy.
Nearly all of the undervalued REITs in Singapore look interesting in terms
of yield, low indebtedness and capacity for expansion.
 • Singapore was the 2nd fastest growing economy in the world in 1H 10
(behind Qatar). The rising economy should support real estate values.
Singaporean GDP is slated to grow 4-6% in 2011.
• REITs with the bulk of their assets in other countries besides Singapore --
Indonesia, Japan or Malaysia appear to be selling at a deeper discount.
These REITs include Lippo MapleTree Retail Trust and FIrst REIT, which
hold the majority of their assets in Indonesia. The higher discount may be
justified, as these economies and real estate sectors are not as attractive
as Singapore. Note also, the 10 year governmental bond of Indonesia is
currently at 9.20%.
• AIMS AMP Capital REIT has all of its assets located in Singapore and
therefore appears to be an attractive REIT. Whether or not the S-REIT has
a sustainable yield (currently at 22%) is an area for further research.

Singaporean REITs Listed by Ascending Enterprise Value

to Property Value:

Figure 17: Singapore and Hong Kong REITs listed by Ascending

Enterprise Value divided by Property Value
(First Listed Indicate Deeper Discount)(Notes: Colours indicate property sector:
Office RetailIndustrialResidential DiversifiedOther)
(Dollar Values in $US or $C, depending on the main listing Singaporean
exchange or Hong Kong Exchange)

Property Ticker Curre Current Gros Mark Enterprise Recommen

Trust nt Market s et Value/Prop dation
Price Capitaliza Yiel Cap/ Value @
tion d NAV 6%

Lippo D5IU.S 0.55 594,938,85 9.09 0.66 0.50 Further

MapleTree I 0 % Research
Retail Trust

MapleTree M44U. 0.95 1,947,500, 7.58 1.17 0.69 Further

Logistics Trust SI 000 % Research

First REIT AW9U. 0.76 209,360,51 10.1 0.78 0.67 Further

SI 8 3% Research

AIMS AMP BU5U. 0.23 337,317,85 22.2 0.74 0.85 Further

Capital REIT SI 7 6% Research

Frasers A48U. 0.17 525,300,00 5.88 0.63 0.85 Further

Commercial SI 0 % Research
Trust
 Cambridge J91U.S 0.54 540,270,00 9.26 0.90 0.91 Further
Industrial Trust I 0 % Research

Source: Company annual reports and Bloomberg

Valuation Analysis of S-REITs Based on a Range of

Capitalization Rates:

As Singapore appears to be a potentially attractive REIT sector, an analysis of

share price appreciation/ depreciation based on different capitalization rates is
presented in Figure 18:

• Lippo Maple Tree Retail Trust appears the most undervalued in this
analysis, but note that all of the assets of Lippo Maple Tree are located in
Indonesia. Indonesia’s 10 year governmental bond yield at January 2011
was 9.20% (therefore the REIT’s yield of 9.09% is not actually below the
governmental bond rate in Indonesia) and the country’s commercial real
estate markets are likely not as attractive as Singapore’s real estate
markets.
• First REIT also has the majority of its assets in Indonesia.

Risks to REIT Valuations:

Risks to the Valuations of REITs provided in this report, based on both NAV and
property value based on NOI, include the following. Note that this report does
not analyse these risks in detail.

• A financial crisis (such as the GFR in 2008 and 2009) which disrupts
property markets.

• An economic downturn of less severity than a full financial crisis, but

which results in distressed commercial real estate markets.

• Related to the first two risks listed, sluggish employment growth,

driven by economic conditions.
 • Higher interest rates, driven by rate raises by countries’ respective
Central Banking Institutions, in order to cool down overheated economies,
or for other reasons.

• Overbuilding of commercial real estate beyond demand levels in the

REIT’s markets.

• On sector by sector basis

○ Higher office vacancy as people telecommute more often, or
downturns in financial services (which tend to use more office space
than other industry)
○ Sluggish mall retail growth as people utilize the internet more
often for purchasing, and/or aging baby boomers reduce spending
for retirement
○ Lack of industrial growth as more industry is shifted to lower
wage countries (as this trend continues to Bangladesh, Pakistan,
etc)

Conclusion:

In an initial screening ofvaluationof 168 REITs across NZ, Australia, the US, the
UK, Canada and Singapore, this report has identified 12 A-REITs, 2 NZ-REITs, 6 S-
REITS, 6 US-REITs and 2 C-REITs for further research. From a national level,
REITs appear most attractive in Singapore, New Zealand and Australia, due to
relatively high numbers of REITs selling below NAV levels, relatively high spreads
between the countries’ respective risk free rates and REIT average yields, as well
as relative numbers of securities selling at a discount to NAV. The spread
between national risk free rates and REIT yields could narrow as the national
REIT sectors mature, leading to appreciation in NZ, Australian and Singaporean
REIT prices. However, further research should be cognizant of risks involved in
the valuation of REITs based on NAV and property values.

Future research can include more research on individual REITs, including the
quality of the properties, the quality of management (their proven ability to
generate increasing returns from expansion), forecasts of net operating income,
and the competition from other property firms.On a national level, additional
research could be conducted on institutional ownership of REITs in NZ, Australia
and Singapore, and existing and potential for additional sources of commercial
real estate financing in these countries. Such analysis would strengthen the
recommendations of investment in the REIT sectors of New Zealand,
Singaporean, Canadian, Australian, British and American REIT sectors.
 ○

Appendix:

Factors Driving REIT Valuation:

REIT prices are driven by net asset value, with the primary component of net
asset value comprised of property prices. Property prices are determined, at
least according to most leading REIT research houses, as a function of net
operating income and a capitalization rate. Green Street Advisors has
represented the valuation of REITs graphically in the following chart:

Green Street Advisor’s Valuation Overview:

Source: Green Street Advisors

The level of net operating income and the capitalization rate – which drive the
mark to market value of assets and liabilities in Figure 5 are driven by both
macro factors, as well as sector-specific factors, such as the quality of the
properties owned by the REIT, the quality of the management team and the level
of indebtedness. These factors are discussed briefly below.
Macro Factors:

• Direction of Interest rates – as discussed, a steadily declining interest

rate as measured by the governmental bond yield will support REIT
prices.

• Spread between the Government Bond and the REITYield – The higher
the difference in yield between REITs and the risk free rate, the more
attractive REITs are to investors, as investors are rewarded for taking
higher risk. In the US, the spread has traditionally been narrow, as
shown in the figure below – in international markets, possibly this could
be evidence that future REIT yield premiums to the risk free rate will
disappear (as REIT prices appreciate).

• Level of Institutional Ownership – institutions tend to be more steady

holders (do not sell as easily during small downturns) of investments,
and also tend to control higher amounts of capital than individual
investors. In countries which institutions hold significant numbers of
REITs, REIT prices will likely be stronger (note that institutional
ownership is a debated topic, in terms of the support for REIT prices, so
this final macro factor is debateable in terms of its impact).

• GDP Growth – Faster growing economies offer more opportunity for

REITs and support property prices

• Demographic Factors – properties located nearer high income, high

population growth centres will be valued higher than properties in low
income, declining population areas.

• Availability of Financing – The introduction of new financing vehicles,

such as commercial mortgage backed securities (CMBS),convertible
debt, preferred stock, private placements with life insurance or pension
funds, and private equity financing has supported REIT growth,
particularly in the US.

• Industry-Wide Vacancy Rates – Certain sectors will have higher

vacancy rates during certain time periods – overall higher industry
vacancy rates will lower valuation.

REIT Specific Factors:

 • Indebtedness –Many REITs globally were forced to issue equity and/or
sell asset to reduce leverage in the financial crisis of 2008-09. As the
CEO of Vornado Reality Mike Fascitelli has stated, “Balance sheets
don’t matter until they matter, and then they matter a lot.” 7 Going
forward, Moody’s has recommended that REITs keep total debt to total
assets below 45% -- REITs that have higher levels of this will be
negatively impacted.

• Quality of Assets – “Prime grade” real estate will trade at a premium

compared to lower grade real estate, as prime properties will have less
turnover, can command higher rents, and generally represent lower
risk.Annual same property growth, location, general reputation are
indicators of asset quality.

• Quality of Management – REITs with management teams that have a

proven ability to increase shareholder value will trade at a premium.

• Size – all other factors equal, larger REITs are more attractive than
smaller REITs, due to their ability to command an investment grade
rating (the number one factor towards Moody’s and S&P granting an
investment grade rating is the size of the firm), and to attract capital.

• Diversification – REITs with properties in several geographical locations

will be more attractive than single property or location REITs (although
certain REITs can buck this trend, if they stress that they know one
location very well or have a very high quality location).

• Vacancy Rates – Properties with high vacancy rates will earn lower
income and therefore lower valuation -- indications of potential higher
vacancy rates are low weighted average lease periods, low numbers of
retained tenants and lower than average occupancy rates.

• Property Sector(Mall, Industrial, etc) –According to Green Street

Advisors, Industrial REITs are the most attractive REITs to investors,
due to perceived steadiness of income and growth prospects. The
relative sectors are presented below:

Observed Average Premium to Asset Value:

7 Interview with Mile Fascitelli at NAREIT: accessible from

http://www.youtube.com/user/NAREIT1#p/u/16/lKWXy36EWd4 accessed 1/24/11
Source: Green Street Advisors
REIT Data, New Zealand and Australia:
REIT Sector: OfficeRetailIndustrialResidentialDiversified Other

Enterpri
se
Current Marke Value/P
Curre Market t rop Debt/To Asset
SN Property Ticke nt Capitalizat Gross Cap/N Value tal Office/Retail/Industrial/R Split by
Z Trust r Price ion Yield AV @7% Assets esidential Mix Country Notes
Argosy Property ARG.N Also known as ING
NZ Trust Z 0.74 399,199,160 12.69% 1.01 0.76 84.0% 29%/35%/36%/0% NZ Property Trust
National Property
Trust NAP.NZ 0.51 84,481,426 8.82% 0.87 0.57 22% 32.8%/55.2%/12%/0% NZ
Goodman GMT.N
Property Trust Z 0.95 856,761,878 8.95% 1.14 0.95 37% 39.7%/0%/60.3%/0% NZ
NZ Rural
Property Trust (not traded) na - 15% All farm income NZ
Kiwi Property Largest Property trust in
Trust KIP.NZ 1.01 972,581,998 8.74% 0.83 0.89 50% 37%/60%/0%/0% NZ NZ
AMP NZ Office AMO.N Most office buildings are
Property Trust Z 0.79 768,243,220 8.93% 0.86 0.79 23% 90%+/-10%/0%/0% NZ CBT, prestige assets
DNZ Property DNZ.N IPO Aug 10, Office is
Fund (PIE) Z 1.17 290,959,786 4.27% 0.97 1.24 43.90% 40%/35%/20% NZ only 89% leased

50.3% US/ 38.1% AUS Losses have

driven equity to negative, Odd
security, appears to have substantial
Centro Properties 160,447 NOI, but claims current NTA is
AUS Group CNP.AX 0.165 ,650 na 0.92 98.30% 0%/90%+/0%/0% negative
Increased (issued)
5,468,400, outstanding shares by
$A GPT Group GPT.AX 2.94 000 1.53% 4.26 1.05 23% 77%/23%/0%/0% AUS 106% in 2009
Mirvac Property MGR.A 1.235 4,223,700, 6.48% 1.07 26.80% 56%/31%/13%/? AUS Interesting business
Trust X 000 0.74 model with a home
 builder included, but
residential less than
10% of income
8,568,000,
Stockland SGP.AX 3.6 000 6.06% 1.00 1.49 18.00% 29%/18%/18%/35% AUS
Over 80% of income
1,690,141, from investment
Australand ALZ.AX 2.93 200 3.41% 0.85 1.39 27.10% see notes AUS property
49%
AUS/33% Largest shopping centre
Westfield WDC.A 11,063,000, US/14% REIT in the world, AUS
Property Trust X 9.62 000 6.65% 0.92 0.88 42.70% 100% shopping centres UK/ 4% NZ based
Multiplex
Acumen Property MPF.AX 0.053 - 0.00% NA NA
Centro Retail 548,735, AUS performing much stronger than
Trust CER.AX 0.24 760 0.00% 0.73 1.05 100% retail US
All divisions rebounding
Ardent Leisure AAD.A 308,165 40% Theme Parks/15% in 2010, bowling
Group X 1.02 ,460 10.54% 1.11 0.76 32.09% bowling/15% health AUS weakest in 2009
Abacus Property 3,502,504, 96% AUS, Forced to issue shares
Group ABP.AX 2.32 000 3.34% 3.74 2.82 27% 45%/33%/22%/0% 4% NZ in 2009 to avoid default
Agricultural Land 16,931
Trust AGJ.AX 0.19 ,867 10.63% 0.58 0.82 67% 100% agricultural AUS
Astro Japan 167,71
Property AJA.AX 0.33 0,013 2.12% 0.46 1.08 76.90% 44%/48%/0%/8% 100% in Japan
Largest holder of pubs
in AUS, has performed
relatively strongly
ALE Property 294,456 compared to other
Group LEP.AX 1.92 ,655 12.50% 0.90 0.82 52% 100% pubs AUS AREITs
Relatively small Areit,
APN Property 3,494 38% Europe/38% retail REIT 38% EU, invests mainly in other
Group AEZ.AX 0.025 ,057 50.00% 0.13 0.83 73% funds AUS REIT funds
133,912, Owns 25 holiday parks
Aspen Group APZ.AX 0.48 320 18.74% 0.68 0.78 30% Holiday parks AUS around Australia
Owns 340 preschools and educational
Australian 118,777, Mainly appears to own facilities - suspended dividend for 1
Education Trust AEU.AX 0.88 120 0.76% 0.65 0.70 51% preshools year from 2009
4 Segment business,
Becton Property 10,650 Construction/Develop/Fund tangible book value is at
Group BEC.AX 0.052 ,668 0.00% 0.03 #VALUE! 69.20% Management AUS almost negative levels
Shares have
outperformed AREIT
index, likely due to
Bunnings BWP.A 744,719, steady nature of
Warehouse X 1.77 390 6.82% 0.94 0.84 18.80% 100% Bunning Warehouses AUS warehouses
Carindale 288,540, Sole Asset: 50% Carindale Partially owned by
Property CDP.AX 4.122 000 6.74% 0.74 1.03 11.7% Shopping Cntr AUS Westfield's
One of AUS's largest
retail REITs,
Performance in retail
CFS Retail 4,843,085 sector in AUS has been
Property Trust CFX.AX 1.785 ,205 7.00% 0.88 1.19 29.50% 100% retail AUS relatively strong
Oddly classified as an
Challenger CGF.A 2,552,784 AREIT by the ASX, as is
Limited X 4.69 ,175 3.09% 1.85 NA 84% Mainly life insurance AUS a life insurer
Listed in 1999 by
Challenger Wine CWT.A 41,00 Challenger, is for
Trust X 0.23 1,410 4.99% 0.52 0.26 27% All vinyards AUS vinyard properties
Has several funds,
appears to have
AUS/US consolidated many of
Charter Hall CHC.A 2,801,384 16.8%/NZ them into Charter Hall
Group X 2.41 ,000 1.63% 3.63 4.39 38.50% 50%/37.3%/12.7%/0% 1.8% in late 2010
Charter Hall CQO.A 13,885,200, 64% AUS/36% US Was named
Office REIT X 2.85 000 0.65% 6.72 3.65 33.50% Office Macquarie Office Trust in 2006
53% AUS/32% US/8% EU/7% NZ Was
Charter Hall CQR.A 4,455,440, named Macquarie Countrywide Trust
Retail REIT X 2.96 130 1.79% 4.00 2.56 38.3% Mainly Shopping Centres in 2009
(Financial Info
only given to
Cheviot Bridge shareholders) - NA NA NA
Cromwell CMW.A 534,344 Mainly CBD office in
Corporation Ltd X 0.76 ,550 11.84% 1.00 1.28 57.80% Office: 87% AUS Australia
Was previously named
3,259 Taragon Property Fund,
CVC Property CJT.AX 0.01 ,098 0.00% 0.40 1.05 52% 4 Properties, Warehouses AUS owns 4 properties
Appears in breach of
bank covenants - no
Compass Hotel CXH.A 2,47 information since 2008
Group X 0.02 4,600 0.00% NA 0.31 71% 100% Hotels AUS on website
One of Australia's largest property
DEXUS Property 3,843,472, Approx 56% office/43% trusts- owns many of Sydney's CBD
Group DXS.AX 0.805 500 6.34% 0.85 0.92 30% industrial office buildings
Was named Macquarie DDR Trust until
2009 - has most of retail assets in the
329,020 US, has not performed strongly vs
EDT Retail Trust EDT.AX 0.07 ,361 0.00% 0.60 1.36 65.60% Shopping Centres AUS retail only
Galileo Japan 12,166 Similar to AstroJapan
Trust GJT.AX 0.03 ,757 0.00% 0.08 NA 83.70% 34% office/43% retail & leisure Japan Property
GEO Property GPM.A 0.19 81,103 13.16% 0.29 28% Residential Property Developer AUS Listed residential
Group X ,900 0.54 property developer, plus
 3 income generating
properties -- is
liquidating in 2010-11
Was named Macquarie
52.6% Goodman Group in
AUS/21.4% 2006, is the largest
GMG.A 4,172,187, UK/12.7% industrial property
Goodman Group X 0.655 163 5.19% 1.39 0.87 29.40% Industrial Property EU group in Australia
Mainly South Africa Duel listing on
ASX and JSE (South Africa)
Growthpoint GOZ.A 3,762,662, 18%/0%/81% industrial/1% Restructured the group in 2009,
Properties X 1.96 808 7.14% 0.97 0.76 53.80% carpark makes comparisons difficult
Debt levels still over
ING Real Estate 17,574 covenant at end 2010 of
Entertainment IEF.AX 0.1 ,900 0.00% 0.20 NA 73.4% Mainly entertainment of hotels AUS 70%
Australia's only
ING Real Estate 62,154 Hospitals and health care healthcare only listed
Health Care IHF.AX 0.955 ,265 8.01% 0.97 NA 53% facilities AUS REIT
ING Industrial 1,373,919,
Fund IIF.AX 0.53 000 3.03% 0.93 0.99 47.90% Logistics, Manufacturing Ctrs 56% AUS/33% CAN/11% EU
1,500,950,
ING Office Fund IOF.AX 0.55 000 7.09% 0.74 1.15 15.40% Offices 54% AUS/26% EU/20% US
Offers ski slopes,
aquariums and tree
walks through a third
Living and 81,788 party provider, is almost
Leisure Australia LLA.AX 0.03 ,582 0.00% 1.00 NA 50% Aquariums and ski slopes AUS bankrupt
Macarthur Cook 21,285 26.5% Retail/39.5% office/11% Invests in 3 property
Properties Fund MPS.AX 0.11 ,899 0.00% 0.32 NA 36% indust AUS funds in AUS
A managed fund offered
Mirvac Industrial 10,511 by Mirvac - appears
Trust MIX.AX 0.029 ,282 0.00% 0.21 NA 84.30% US industrial property US close to bankruptcy
Prime Retirement Undergoing financial
and Aged Fund PIN.AX - NA - NA 60% AUS Retirement Communities AUS difficulty currently
2nd pub only REIT in
AUS, was previously
Redcape 13,003 named Hedley Leisure &
Property Fund RPF.AX 0.08 ,408 0.00% 0.17 NA 77.10% AUS pubs AUS Gaming
Used to be ANZ's
property trust, must be
Rabinov Property 28,712 70% office/28% retail/2% getting close to violating
Trust RBV.AX 0.55 ,317 17.27% 0.57 NA 78.50% industrial AUS debt covenant
Was named Babcock
13,208 and Borwn Residential
RCL Group RLG.AX 0.075 ,100 0.00% 0.12 NA 68.71% Residential Property Developer AUS Land Partners in 2007
 Was Named Mariner
Real Estate RCU.A 21,157 Property Income Trust in
Capital Partners X 0.07 ,975 42.57% 0.23 NA 71.60% Office/Retail/Some industrial US 2008
RNY Property 28,975
Trust RNY.AX 0.11 ,528 0.00% 0.26 NA 70% Mainly Office/Some industrial US Mainly NY Tri-State Area
95% AUS/5% International Mainly a
THG.A 312,785, hotel REIT, but with 30%
Thakral X 0.535 075 0.00% 0.54 0.87 48.80% 70% Hotels retail/commercial exposure
Tishman Speyer 148,913, Office REIT, based in the
Office Fund TSO.AX 0.44 998 0.00% 0.37 0.71 74.40% Office Properties US US
Office REIT, based in
Trafalgar 98,154 Australia, has 7
Corporate TGP.AX 1.15 ,700 0.00% 0.75 NA 49.90% Office Properties AUS properties
Trinity Funds 25,487 Very difficult year in
Management TCQ.AX 0.11 ,169 0.00% 0.56 NA 63.40% Office, commerical and industial AUS 2008-2009
Most assets in Nordic EU
Valad Property 2,356,313, for Valad Corp,
Group VPG.AX 1.03 414 0.00% 7.92 NA 46% Office and Industrial EU/AU interestingly
REIT Data, Canada:

$C
EV/Pro
p Debt/A
Canada Company Ticker Price Market Cap Yield Value ssets Type Region Notes
AP- Office
Allied Properties UN.TO 21.68 911,210,400 6.09% 1.88 48% Property Canada Owns offices in several cities in Canada
51%
office/35%
AX- 1,027,232,00 retail/14%
Artis REIT UN.TO 13.66 0 8.57% 1.23 industrial Western Canada mainly Alberta
BTB- 10.26 Retail and Mainly Selling below NAV but likely will have to delever by
BTB REIT UN.TO 0.91 30,657,900 % 0.72 81% Office Quebec issuing equity
Boardwalk Real
Estate BEI- 2,279,527,20 Mainly
Investment UN.TO 43.37 0 5.30% 1.04 Apartment Alberta Canada's largest apartment REIT, 5th largest REIT overall

CWT.- 2,748,534,30 Mainly

Calloway REIT UN.TO 23.99 0 6.46% 1.07 54% Retail Alberta 3rd largest REIT in Canada
Canadian
Apartment CAR- 1,200,496,00
Properties UN.TO 17.95 0 6.02% 0.97 62.75% Residential Canada

REF- 2,159,802,40 Office and

Canadian REIT UN.TO 32.41 0 4.32% 1.24 51.80% Apartment Canada

Chartwell CSH- 1,077,216,00 Nursing

Seniors Housing UN.TO 8.4 0 6.43% 1.02 Homes Canada, about 12-15% in the US

CUF- 1,355,400,20 Mainly

Cominar UN.TO 21.77 0 6.61% 1.01 Apartments Quebec
Mainly
CRR- Altantic Has been paying out slightly higher than 100% of AFFO --
Crombie UN.TO 12.71 839,241,300 6.92% 0.80 54.50% Retail Canada can't continue, but selling below NAV

D- 1,406,841,80
Dundee UN.TO 30.94 0 7.11% 0.91 Office Mainly Alberta and Ontario
EXE-
Extendicare UN.TO 9.94 823,827,200 7.67% 0.42 65.3% Healthcare about 75% of assets in US, 25% in Canada
 INN-
Innvest UN.TO 7.02 625,131,000 7.12% 0.90 Hotels Canada Canada's Largest Hotel REIT
MRT-
Morguard REIT UN.TO 14.88 846,523,200 6.05% 0.89

PMZ- 1,367,926,00
Primarus UN.TO 19.9 0 6.13% 0.91 53%
REI- 5,807,500,00
RioCan REIT UN.TO 23 0 6.00% 1.11 57% Retail Canada's Largest REIT

REITs Data, Singapore:

Enterprise
Singapor Current Current Market Gross Value/Prop Debt/Total
e Property Trust Ticker Price Capitalization Yield Value @ 6% Assets
540
Cambridge Industrial Trust J91U.SI 0.54 ,270,000 9.26% 0.91 Industrial Trust
Starhill Global Real Estate P4OU.S 1,243
Trust I 0.64 ,534,770 8.88% 1.06 Singapore, Malasya, China, Australia
C61U.S 4,206
CapitaCommercial Trust I 1.49 ,730,410 4.72% 1.14 Mainly Office
M44U.S 1,947,
MapleTree Logistics Trust I 0.95 500,000 7.58% 0.69 Industrial Trust
C2PU.S 1,046,
Parkway Life I 1.73 200,200 7.51% 1.43 Asia's largest healthcare REIT
C38U.S 6,169,
Capital Mall Trust I 1.94 200,000 5.67% 1.37 Mall REIT - Properties are all in Singapore
AW9U. 209
First REIT SI 0.76 ,360,518 10.13% 0.67 Healthcare -84% of assets are in Indonesia
BU5U.S 337 Interesting -- stock price has fallen from 1.30 to .
AIMS AMP Capital REIT I 0.23 ,317,857 22.26% 0.85 20 -- increase in shares issued?
A48U.S 525
Frasers Commercial Trust I 0.17 ,300,000 5.88% 0.85 Office - Singapore, Australia and Japan
Lippo MapleTree Retail 594 Retail -- mainly grocery centered shopping in
Trust D5IU.SI 0.55 ,938,850 9.09% 0.50 Inodnesia
Ascendas Real Estate A17U.S 4,102
Investment Trust I 2.19 ,089,000 5.48% 1.12 34% Industrial - 100% Singapore
AU8U.S 780 100% Mainland China -- mainly Beijing and
CapitaRetail China I 1.25 ,962,500 6.51% 1.03 33% Shanghai
0778.H 6,833
HK Fortune REIT K 4.1 ,050,746 5.99% 0.95 Malls in Hong Kong
REIT Data, UK:
Enterprise
Value/Prop
Current Current Market Gross Value @ Debt/Total
UK Property Trust Ticker Price (£) Capitalization Yield 6% Assets
438,
Big Yellow Self Storage BYG.L 3.36 480,000 2.38% 1.36 Storage Space Large self storage REIT in the UK
4,634, Approx 60% office and
British Land BLND.L 5.27 580,828 4.93% 1.49 40% Retail
1,598,
Derwent London DLN.L 15.8 656,593 1.76% 1.25 57% Office Mainly prime London office space
1,132, Retail and Focus on London, buying properties
Great Portland Estates GPOR.L 3.647 007,841 3.29% 2.64 Office and renovating them
3,073,
Hammerson HMSO.L 4.36 800,000 5.53% 1.30 Office, Retail Has about 20% of assets in France
26,
HighCroft Investments HCFT.L 5.1 352,924 0.00% 0.36
5,294, Approx 58% office and Largest commercial Property
Land Securities LAND.L 7 800,000 4.00% 1.18 42% retail Company in the UK
2,344, Shopping Bid for by Simon Property Group (US
Capital Shopping Centers CSCG.L 3.769 318,000 2.65% 1.23 53% Centers based), Simon has withdrawn bid
Manufacturing
175, facilities,
A&J Mucklow Group MKLW.L 2.92 462,800 6.15% 1.01 Warehouses Smaller Industrial REIT in the UK
Light
Industrial,
2,212, Office and
SEGRO SGRO.L 3.008 684,800 3.13% 1.08 83% Warehouses Owns industrial in UK and Europe
1,031, Shopping
Shaftsbury SHB.L 4.52 916,000 2.21% 1.96 Centers Appears Overvalued
REIT Data, United States:

Enterprise
Value/Pro
Current Current Market Gross p Value @ Debt/Total
SUS Property Trust Ticker Price Capitalization Yield 6% Assets
One of the largest
US mall REITs,
All retail, split into stock price has
28,477, regional & outlet recovered to 2008
USA Simon Property Group SPG 99.66 645,680 2.71% 1.09 50.70% malls levels
Issued approx +
30% equity in
2009 to lower
14,740, debt, debt ratios
Retail General Growth Properties GGP 15.48 000,000 1.23% 1.43 84.60% Shopping Centres still high
7,323
Kimco Reality Corporation KIM 18.04 ,338,000 3.66% 1.55 45.4% Shopping Centres A large retail REIT
3,847 Based in Santa
Macerich MAC 47.37 ,675,620 5.49% 1.05 53.9% Shopping Centres Moncia, California
Based in NY,
5,283 High End Offices & Manhatten and the
SL Green Reality SLG 67.51 ,332,600 0.59% 1.09 44.30% Shopping Centers surrounding area
Locates near
higher income
areas, 43 years of
increased div per
4,773 High End Shopping share (longest in
Federal Reality FRT 77.93 ,873,502 3.44% 1.14 41.60% Centres US reit history)
Single Tenent
Properties, for
retail chains such
3,542 Single Tenent as Taco Bell,
Reality Income Corp O 34.2 ,350,739 5.00% 1.38 43.50% Retail Burger King
Founded in
2,703 Michigan, hit hard
Taubman Centers TCO 50.78 ,490,588 3.27% 1.43 103.2% Shopping Malls by the recession
 Florida based,
moderate quality
1,524, Grocery-anchored shopping center
Equity One EQY 18.18 520,260 4.84% 0.89 44.50% shopping centers REIT
Grocery-archored
3,445 Grocery-anchored shopping center
Regency Centers REG 42.24 ,176,852 4.38% 1.07 47.50% shopping centers REIT
Hosipitality Properties 2,866,
Trust HPT 23.22 276,800 7.75% 0.55 Hotels
CBL & Associates 2,410,
Properties CBL 17.46 876,800 4.58% 0.67
346
Kite Reality Income Trust KRG 5.47 ,469,800 5.48% 2.04
421
Cedar Shopping Centers CDR 6.36 ,095,600 4.25% 0.66

Developers Diversified Reality - #DIV/0! 0.00

Residentia 1,759,1 1.1

l Post Properties PPS 36.2 78,060 2.21% 6 46.40%
14,560,0 1.3
Equity Residential REIT EQR 51.2 00,000 3.57% 3
Apartment Investmnet & 2,954,7 0.9
Mgmt AIV 25.66 49,000 1.17% 0
9,524,0 1.7
Avalonbay Communities AVB 111.68 70,400 3.20% 6
4,211,0 1.3
UDR Inc UDR 23.12 76,800 3.20% 5
3,688,1 1.0
Camden Property Trust CPT 53.7 16,000 3.35% 9
3,612,3 1.3
Essex Property Trust ESS 115.3 49,000 3.58% 9
2,767,4 1.3
BRE Properties BRE 43.18 06,200 3.47% 1
2,807,1 0.8
Senior Housing Properties SNH 22.02 09,600 6.72% 8
Mid America Apartment 2,123,2 1.1
Communities MAA 62.12 61,600 3.96% 8
2,055,7 1.0
Home Properties, Inc HME 54.63 26,900 4.25% 4
 American Campus 2,130,9 1.4
Communities ACC 31.92 79,200 4.23% 5
1,721,5 0.9
Equity Lifestyle Properties ELS 55.84 47,200 2.15% 3
1,413,7 1.1
Colonial Property Trust CLP 18.2 76,000 3.30% 4
656,4 0.9
Sun Communities SUI 33.49 04,000 7.52% 6

Hudson Pacific Properties HPP - #DIV/0!

3,678,7
* Liberty Property Trust LRY 32.23 32,200 5.90% 0.79 45.10% Office REIT for moderately high quality properties
Government Properties GO 1,089,
Office Trust V 26.92 452,400 6.09% 1.60 10.90% Office REIT for government properties, state and federal
One of the largest
US office REITs,
based in Boston but
12,397,1 with offices around
Boston Properties BXP 89.21 39,375 2.24% 1.17 the US
400,
* Parkway Properties PRY 18.29 916,800 1.64% 0.60
Piedmont Office Reality PD 3,454,9
* Trust M 20.01 26,600 6.30% 0.84
2,634,0
* Mack-Cali Reality CLI 33.12 33,600 0.00% 0.67
Corporate Office 2,111,
Properties Trust OFC 35.53 192,600 4.53% 1.11
1,984,
Kilroy Reality Corp KRC 37.9 065,000 3.69% 1.15

8,171,
Industrial Prologis PLD 14.36 270,800 3.90% 1.39
AM 5,472,
AMB Property Corp B 32.5 350,000 3.45% 1.61
1,547,
Extra Space Storage EXR 17.67 008,500 2.26% 1.15
 Trading below net
asset value at 6%
NOI but has very
608, high debt -- likely
First Industrial Reality FR 9.54 365,800 0.00% 0.76 will issue shares
1,138,3
DCT Industrial Trust DCT 5.25 57,500 5.33% 0.79 High Debt
1,106,1
East Group Properties EGP 41 80,000 5.07% 0.97 Initially Promising
1,018,3
Sovran Self Storage SSS 36.83 49,500 4.89% 0.86 Initially Promising
894,
U-Store-It Trust YSI 9.33 560,400 1.50% 0.92

-49
12,146,7
Hotel Host Hotels and Resorts HST 18.24 45,600 0.22% 1.32
2,063,
LaSalle Properties LHO 28.25 945,000 0.85% 1.05
Diamondrock Hospitality DR 1,847,
Corp H 11.95 111,500 0.00% 1.55
High Debt -- will
likely need to raise
914, additional equity
Sunstone Hotel Investors SHO 9.28 172,800 0.00% 0.55 capital
New issue -- NOI
827, taken by multiplying
Pebblebrook Hotel Trust PEB 20.74 318,600 0.00% 1.27 last q's NOI by 4
Strategic Hotels and 862,
Resorts BEE 5.7 410,000 0.00% 1.16 High Debt
760,
FelCor Lodging Trust FCH 7.84 872,000 0.00% 0.91 High Debt